CAF 08: Audit and Assurance

Chapter 3: Audit Evidence Outlines:

Secret Sheet for Quick Revision What is Sufficient Appropriate Evidence, and How to obtain it.
(For students of Muhammad Asif, FCA) Premium Content
(For Spring 2022)

PART A. AUDIT EVIDENCE

(information used by auditor in arriving at conclusions)

Sufficient Appropriate
(Measure of Quantity) (Measure of Quality)

Affected by: Relevance of Evidence Reliability of Evidence

1. Risk
2. Materiality
3. Auditor's Knowledge & Experience
4. Quality of evidence
5. Strength of Internal Control
(Means logical connection between Assertion (depends on its source, nature, circumstances )
and Audit Procedures)
1. Control (e.g.pre-numbered documents)
1. To test Occurrence/Overstatement ---> Selecting sample from recorded amounts 2. Original (vs. photocopy or fax)
will be relevant. 3. Directly (e.g. observation)
To test Completeness/Understatement ---> Selecting sample from supporting 4. External (e.g. confirmation)
documents (i.e. outside accounting system) will be relevant. 5. Documentary (e.g. written minutes)
2. A procedure relevant for one assertion may not be relevant for other
3. To test Operating effectiveness of controls---> Tests of controls will be relevant.
4. To detect misstatements in F/S ---> Substantive Procedures will be relevant.

PART B. AUDIT PROCEDURES

By Purpose By Types Doubts over Reliability Use of Management’s Expert Use of information
(e.g. there is inconsistency) produced by entity

1. Risk Assessment Procedures 1. Evaluate the competence, capabilities and

(Inquiry, Observation, Inspection, Analytical Procedures) Perform additional procedures. objectivity of that expert. Check its Accuracy and
2. Tests of Controls Effect on other aspects of audit 2. Obtain an understanding of the work of Completeness
(e.g. approval, reconciliations, segregation of duties) (e.g. risk, procedures) that expert.
3. Substantive Procedures 3. Evaluate the appropriateness of that
(Analytical Procedures, Tests of Details) expert’s work.

PART C. ASSERTIONS TESTING APPROACH

(Assertions are representations by management that are embodied in F/S)
Inquiry
Reperformance (Seeking information, Alone not sufficient,
(Procedures performed by entity are Reliability affected by Integrity and
performed again by auditor) consistency)
External Confirmation Observation
(Obtaining evidence directly from (Looking at ongoing procedures,
Types of
third parties in written, to confirm closing Reliability limited to time of observation)
Audit Procedures
balance or other information) Inspection
Analytical Procedures (Examining documents, or tangible assets)
(Evaluation of financial information thorugh Recalculation
Comparison and Plausible relationship + (checking the mathematical accuracy of
Investigation) documents, manually or electronically)